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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of EMC Corp was -1.85. The lowest was -3.74. And the median was -2.76.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of EMC Corp for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 0.8916||+||0.528 * 1.0282||+||0.404 * 0.9975||+||0.892 * 1.0108||+||0.115 * 0.9995|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0575||+||4.679 * -0.0772||-||0.327 * 1.0452|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $3,977 Mil.|
Revenue was 7015 + 6079 + 5997 + 5613 = $24,704 Mil.
Gross Profit was 4360 + 3705 + 3587 + 3339 = $14,991 Mil.
Total Current Assets was $15,063 Mil.
Total Assets was $46,612 Mil.
Property, Plant and Equipment(Net PPE) was $3,850 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,907 Mil.
Selling, General & Admin. Expense(SGA) was $8,532 Mil.
Total Current Liabilities was $12,885 Mil.
Long-Term Debt was $5,475 Mil.
Net Income was 771 + 480 + 487 + 252 = $1,990 Mil.
Non Operating Income was 73 + 47 + 50 + 34 = $204 Mil.
Cash Flow from Operations was 1870 + 1403 + 1033 + 1080 = $5,386 Mil.
|Accounts Receivable was $4,413 Mil.
Revenue was 7049 + 6032 + 5880 + 5479 = $24,440 Mil.
Gross Profit was 4505 + 3743 + 3654 + 3347 = $15,249 Mil.
Total Current Assets was $14,663 Mil.
Total Assets was $45,585 Mil.
Property, Plant and Equipment(Net PPE) was $3,766 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,864 Mil.
Selling, General & Admin. Expense(SGA) was $7,982 Mil.
Total Current Liabilities was $11,710 Mil.
Long-Term Debt was $5,469 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(3977 / 24704)||/||(4413 / 24440)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(3705 / 24440)||/||(4360 / 24704)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (15063 + 3850) / 46612)||/||(1 - (14663 + 3766) / 45585)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(1864 / (1864 + 3766))||/||(1907 / (1907 + 3850))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(8532 / 24704)||/||(7982 / 24440)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((5475 + 12885) / 46612)||/||((5469 + 11710) / 45585)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(1990 - 204||-||5386)||/||46612|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
EMC Corp has a M-score of -2.94 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
EMC Corp Annual Data
EMC Corp Quarterly Data